Who do we blame for the abject failure of the Select Deficit Committee to produce a viable budget plan for an up or down congressional vote?
The easiest target is the Senators and members themselves, not the sharpest knives in the drawer to begin with—as I pointed out when they first were named—and certainly not enough with a history of working successfully on a bi-partisan basis to achieve critical mass. Add to that, no “profiles in courage,” no guts to cross party lines to build a consensus product.
It would have taken only one Democrat or one Republican to cross over and join the other side to produce something on which the Congress could vote.
Now, let me quickly point out that those 12 individuals were responding to their respective congressional leaders and the rank and file caucuses, so some of the blame gets shared more broadly.
If anyone believes that the “Sword of Damocles”, i.e. $1.2 trillion of domestic and military spending, cuts will survive the legislative part of the next year’s presidential election, I have some land in
Kick it, kick it
“Kicking the can down the road” has been what this Congress does best—both sides of the Hill, both sides of the aisle—and it sucks.
Even if it isn’t 100 perfect, doing something always is better than doing nothing and letting delay worsen events.
If the domestic economy and international situation aren’t woeful enough to dictate some substantive steps, what do these selfish public officials require to convince them of the need to take deficit reduction action now?
Tom Edsall, writing in the New York Times, lays out the possible political strategies of each party in doing nothing, which may have been part of this charade from day one.
http://campaignstops.blogs.nytimes.com/2011/11/18/capitalizing-on-collapse/?hp
Fannie/Freddie Compensation
I suspect that Congress first will do something to limit the compensation (salary and bonuses) of top Fannie and Freddie execs, then do high fives over the money they saved the “tax payers” and gloat over the Hill extracted revenge for those poorly underwritten, red ink generating subprime loans.
Except for a few messy facts, which seldom stops an angry mob?
Most of those company “squeezees” weren’t responsible for those losses; they were given their assignments to “fix” what ultimately erupted in 2008.
None of the people being targeted produced the subprime securities which failed costing billions. That was Wall Street, using its own corps of mortgage brokers and avoiding the more restrictive Fannie/Freddie underwriting systems. The investment banks then managed to bamboozle the rating agencies into awarding AAA measures to corporate junk bonds, facilitating sales to institutional investors worldwide.
And, the Fannie and Freddie officials--who bought that mortgage poison five or more years ago, seeking yield and revenue and who, theoretically, have angered Congress--all were fired long ago.
My Advice
If I was advising Fannie and Freddie (and I am not), I would urge the top half dozen execs to resign if Congress puts through major compensation caps.
That would then force Treasury and Federal Housing Finance Agency (FHFA), F&F’s regulator, to more closely run the companies and scramble to put together top managements.
Wait and see what the civil servants—without securities, mortgage, or trading experience--can produce running two business with combined mortgage assets of about $1.5 TRILLION.
There was a reason, when Fannie Mae first was privatized in 1970 that the Congress wanted the company (and later Freddie) to not run by civil servants. It was the abysmal financial performance of HUD or the Department of Housing and Urban Development.
The Congress saw that government housing employees didn’t have the skill, experience, or creativity to produce what it wanted, without generating huge losses (see HUD’s history) and wisely ordered the new Fannie Mae to employ private sector employees, earning private sector wages, with private sector incentives. And, Fannie Mae, for the 35 years through 2005, showed the Congress to be correct.
This Congress would have more credibility if they took similar actions against the large commercial banks and Wall Street investment banks, which received tons of taxpayer’s dollars through TARP and zero obligations to invest that money.
Instead, Congress has gone for the low hanging former GSE fruit.
How About Comp Caps for the Big Banks and Wall Street?
Focusing merely on one or two Wall Street execs and limiting their compensation would generate far more savings than whacking to all of the people at Fannie and Freddie, who will see their incomes suffer.
But, hey the Congress—both D’s and R’s—in their rush to claim Fannie and Freddie coup will grab a cheap headline and then run like hell—blaming others—if executive departures produce worse financial results not better.
If the Fannie/Freddie leadership bails, the message will get to the rest of their employees, who will start looking elsewhere and jump at any opportunity to get away from possible salary freezes or more forced firings.
Courageous Ed DeMarco, FHFA’s Director, was absolutely right in his testimony on the Hill last week. He sees the talent departing and he knows it takes very smart and able individuals to run these large mortgage operations. You don’t find them growing on trees in
(Before this latest salary/bonus dust up occurred; already the top two Freddie execs announced their planned departures.)
Enjoy whatever you save in being penny wise and pound foolish Congress. Your actions, here, are self defeating.
Before voting their anger, Members of Congress might want to familiarize themselves with the facts not the “talking points issued by F&F’s ideological critics and business competitors.
Barry Ritholz’s column, writing in Sunday’s Post business section, would be a great place for them to start.
Of course, that same “get the facts” advice applies to the Wall Street Journal and Washington Post editorial sides, D’s and R’s on the Financial Services and Banking Committees, the Obama Administration and various right wing commentators at AEI, Cato, and the Heritage Foundation.
-- IMO, the GOP presidential candidate with the most common sense, based on his debate pronouncements is Ron Paul. Hard to feel ill about a guy—who sometimes is whacky—but dispenses a ton of good advice.
--It looks to me that Mitt Romney has put his campaign on cruise control and expects to glide into the GOP nomination.
--Newt is what he is, a scintillating speaker and historian, but his hypocrisy during Bill Clinton’s infidelities, the details of Newt’s three marriages (and likely affairs?), his lavish spending/charging at Tiffany’s, and even his work for Freddie Mac (which I first found out about it when I read it last week in the paper) raises character questions and puts him at odds with many Republicans.
Regarding Freddie, you don’t take that much money from any client without endorsing their actions and positions.
--Redskins Coach Mike Shanahan’s facial contortions almost make him like he is going to cry during the games. Of course, with his team’s poor play and Mike’s poor coaching and leadership, his tears would match those of the loyal Skins fans.
--Will the GOP ever get tired of defending the rich and the haves, at the expense of the middle class and have nots? And given the fact that the latter would appear to have far more voting power, when will this majority turn on the aristocratic bent of the Republican Party?
Maloni, 11-20-11
